Can't operate sans payment of dues by gas companies, exploration firms tell govt

Say two entities have to pay over Rs1,3tr

ISLAMABAD (Web Desk) – Just a day after the oil marketing companies objected to reducing the high-speed diesel price, the petroleum exploration and production companies operating in Pakistan threatened to suspend activities over non-payment of their dues by the Sui Southern and Sui Northern.

Demanding immediate disbursal of a huge amount [Rs1.3 trillion, or $4.65 billion], the Pakistan Petroleum Exploration and Production Companies’ Association (PPEPCA) listed their concerns in a letter addressed to Finance Minister Ishaq Dar, Minister of State for Petroleum Dr Musadik Malik and relevant entities.

According to the PPEPCA, the payment made by the gas companies is not even sufficient to cover payment of 18 per cent sales tax, 12.5pc royalty and advance income tax. Thus, they are not in a position to fund even their operations.

Thus, they have no option but to borrow money at exorbitant rate of 25-30pc to run the gas production operations, forcing them to shelve most of the planned exploration and development drilling activities.

Earlier, the oil marketing companies had said that uninterrupted fuel supply could not be possible in the given scenario after the government decided to slash the HSD price by Rs7.

They claimed that the move caused a Rs11 billion loss to the industry and that the HSD price should have been increased instead, citing a formula approved by the Economic Coordination Committee in July 2020.

In a letter addressed to the Oil and Gas Regulatory Authority (Ogra) chairman, the Oil Companies Advisory Council (OCAC) accused the body of forced reduction and manipulation in determining the latest rate fixed for the fuel.

With effect from July 16, the government had decided to reduce the petrol rate by Rs9 per litre and that of HSD by Rs7, citing a stronger rupee as the main reason.

However, the representative body of oil marketing companies said the government should have cut the Petroleum Development Levy (PDL) if it wanted to reduce the HSD price which was “unilaterally and unjustly reduced by applying inaccurate premium”.

According to the OCAC, premium and other incidentals for the previous fortnight are to be applied if the Pakistan State Oil (PSO) did not import a particular commodity. In this particular case too, the PSO did not import any HSD during the first fortnight of July 2023, meaning that the previous premium – $11.50 per BBL – should have been used in price computation. Bu the Ogra used premium of $4.20 per BBL which was against the ECC decision.

They also presented their own calculations which show that the impact on price was Rs12.79 per litre while the premium and the exchange rate stood at $7.30 per BBL and Rs278 respectively.